U.S. judge is ordered to withdraw from 3 asbestos-bankruptcy cases

Appearance of bias found by appeals court

A federal appeals court yesterday ordered the judge overseeing five important asbestos-related bankruptcy proceedings to withdraw from three of the cases because of the appearance of bias.

Legal experts said the decision would probably force new delays and might cause far-reaching economic repercussions in the long-running litigation, which involves thousands of people who say they were harmed by exposure to asbestos.

In a 2-1 decision, a panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia ordered Alfred M. Wolin, a federal district judge in Newark, N.J., to end his role in the bankruptcy hearings involving W.R. Grace, Owens Corning and U.S. Gypsum because his handling of the cases had the appearance of bias. But the three-judge panel said Wolin had not, in fact, "done anything wrong or unethical or biased."

The appeals judges said they would decide later whether to remove him from a fourth case involving Armstrong World, which had asked to be included in any withdrawal order.

Legal experts called the order highly unusual in civil legal proceedings and said it would be up to Wolin to decide whether to continue overseeing the fifth case, involving Federal-Mogul, which was not immediately involved in the ruling.

The ruling was requested by Kensington International Ltd., which bought $275 million in Owens Corning bank debt soon after the company sought bankruptcy protection, and Springfield Associates, another holder of distressed debt.

Lawyers for the creditors objected to meetings that Wolin held with plaintiffs' lawyers and other parties to the case without a record being made for those who were absent. The meetings "were flawed because no opportunity existed for their adversaries to know precisely what was said" and what effects might result, the panel said.

Creditors also argued that the judge had appointed advisers who were not impartial because they represented plaintiffs in a similar bankruptcy case in Newark involving a company called G.I. Holdings Inc. The court noted that the judge and his advisers met with asbestos plaintiffs' lawyers for 325 hours over several years.

The court said two of the advisers, David R. Gross and C. Judson Hamlin, had a conflict of interest because they represented individuals with asbestos claims against G.I. Holdings. The court said there was a "close relationship between the future asbestos claimants and the issues in the five asbestos cases" before Wolin and the G.I. Holdings case.

Judge Leonard I. Garth, who wrote the appeals panel's order, was joined by Judge D. Brooks Smith. Judge Julio M. Fuentes dissented, saying that he did not agree that Wolin's advisers, Gross and Hamlin, "had a conflict of interest."

Wolin did not comment on the ruling. In February, he issued a 102-page opinion denying motions seeking his withdrawal.